Monday, 30 September 2013

The investors, which include Hermes, Aviva Investors, Threadneedle, Schroders and the Methodist Church, have demanded a set decarbonisation target to be inserted into the Energy Bill to give investment certainty to power and manufacturing companies.

In June an amendment to aim to decarbonise the power sector by 2030 was narrowly defeated in the Commons. But in their letter to the Chancellor, who will today deliver his speech at the Tory Conference in Manchester, the investors warned that its omission in the Energy Bill is leading to a paralysis of investment.

The “lack of a meaningful 2030 decarbonisation target” is “exacerbating policy risk and investor uncertainty”, they said. “In many cases, this increases the cost of capital and deters major investors, manufacturers and project developers from investing in the UK and creating jobs.”

The letter, which is signed by investors representing £1trillion assets worldwide, comes amid intense focus on energy policy after Ed Miliband’s bombshell pledge to freeze gas and electricity prices.

The freeze, announced at the Labour conference last week, was condemned as “ill-thought out and irresponsible” by Michael Fallon, the energy and business minister. But the Tories are under pressure to come up with fresh solutions to mounting uncertainty as well as rising bills.

Britain’s leading role in the development of experimental marine and tidal technology was under threat on Friday as it emerged that SSE, one of the major investors, is talking to partners about scaling back its investment in key schemes.

The move follows similar ones by other major players and comes in the middle of a fractious debate about renewables and the future of the wider power market following Ed Miliband’s promise to freeze energy prices and break up big power firms if Labour wins the 2015 election.

The lobby group that represents wave and tidal power said the difficult regulatory environment has depressed forecasts of how much capacity could be deployed and slowed the progress of the sector.

“Without a clear route to market and a coherent plan for attaining volume in the sector, the UK risks being overtaken in this global race for our next decade’s most exciting low carbon market,” said David Krohn, wave and tidal development manager at RenewableUK.

“Wave energy is still in the early years of its story and we need perspective and patience as our industry matures. It is never good when a major player pulls back, but context is important here.

“Wave developers are working hard to develop and refine the technology. To do this they need to have long-term support and volume. Wave array projects need to be in the water as soon as possible, not in five years’ time, so we can get the learning done now.”

SSE confirmed it was reconsidering its four major projects off the Orkney Islands and in the Pentland Firth off Scotland but denied it was pulling out. “We are reviewing our portfolio but we have not at this stage reached any conclusion,” said a spokesman.

Heaven help the planet, because dealing with climate change is going to cost something (although a lot less than not dealing with it). The politics is getting more difficult, judging by the promises of Ed Miliband and David Cameron. They evidently think that voters are in no mood to pay even a modest insurance premium to stop what the latest Intergovernmental Panel on Climate Change report says is a 95% certainty that human activity is destroying our habitat.

The latest round of populism on energy prices began last October, when the prime minister said the government would legislate to put consumers on to the cheapest deal. Miliband joined in last week, with a call for a price freeze. The Tory right riposted with demands to cut support for low carbon generation, currently a small part of the total.

Energy comes with painfully large bills of typically £1,200 a year, probably the biggest bill after the rent or mortgage. Never mind the inconvenient fact that we have lower electricity and gas prices than most western European countries, and that the biggest impact on household bills is world gas prices – going up as Asia booms and Japan, Germany, and Italy abandon nuclear power. The polling shows energy prices hurt.

Both Miliband’s and Cameron’s proposals risk being counter-productive, which is why the government swiftly ditched the prime minister’s. Shopping around may be frustrating, but it is safer than telling companies to put people on to the lowest bill, which would mean they would only charge one tariff.

Miliband’s price freeze from the election until 2017 would have two effects: bigger price hikes between now and the election, and bigger catch-up price rises when the freeze comes off. Price controls do not work. In electricity, price caps were one of the toxic components that caused California blackouts in 2000 and 2001. Sharp rises in wholesale prices, combined with caps on retail prices, would simply cause companies to turn off the lights. Why sell at a loss?

Sunday, 29 September 2013

Q My electricity bills seem pretty steep. Are they higher in the UK than elsewhere?

A In short – not really. Compared to the 15 countries that made up the European Union prior to the 2004 accession (known as the EU15), the UK had the fourth lowest prices in 2012 – when including taxes that each state imposes. Average domestic UK prices were 14.2 per cent lower than a median average across EU15 and G7 countries.

Q What about gas prices then, are they also lower than in other countries?

A Relatively, gas prices are even better for Brits, coming in second lowest in the EU15 last year – and 22.1 per cent below the median average across EU15 and G7 countries.

Q But hold on – you mentioned taxes. How do they affect these figures?

A The tax component added to domestic electricity and gas bills is low in the UK compared to other countries. Excluding all countries’ taxes, UK gas prices were only 1.1 per cent lower than the EU15 and G7 median last year. And electricity prices, excluding taxes, were the fourth highest in the EU15 last year.

Q So if tax rates were the same, would we be getting ripped off?

A Not necessarily. It’s hard to tell how prices would compare if tax rates were harmonised as underlying prices are partly influenced by how much tax is imposed. For example, on a pack of 20 cigarettes that costs £8, around £6.20 can be made up of taxes. But if there were no taxes, it is very unlikely that the same pack would only cost £1.80. In countries with higher rates of tax on energy, therefore, lower taxes would not necessarily see prices fall all the way down to the level one may expect.

Q I’ve heard about the feather/rocket claim – do utilities send our bills rocketing when wholesale prices rise, but then only lower them slowly when wholesale costs fall?

A Perhaps – this one is still open to debate. An Ofgem report in 2011 claimed there was “some evidence that customer energy bills respond more rapidly to rising supplier costs compared with falling costs” yet said the range of possible reasons meant that “the implication for consumer harm is not clear cut.”

Q I hear you, but sometimes my bills just shoot up. I have the copies to prove it!

So why does this happen?

A While energy costs in the UK, including taxes, are fairly low, they can be more volatile than in many peer countries. For example, in fiscal year 2010-11 UK electricity prices jumped 11.2 per cent – excluding taxes. This was among the highest price hikes in the EU, excepting Spain where prices rose nearly 14 per cent.

Q So they’re getting more expensive? Is this why Ed Miliband’s speaking up now?

A Well they haven’t been getting more expensive if you look over several years. In the 10 years to 2012, UK electricity prices went from 7.09p per kilowatt hour (kWh) to 13.9p per kWh. The EU15 and G7 median went from 8.6p/kWh to 16.2p/kWh. UK prices may be more affected by wholesale costs, but those can drop as well as rise.

Thursday, 26 September 2013

In 2009, two of the UK’s largest energy companies, EDF Energy and British Energy, came together in a merger worth over £12 billion.

Under the name of EDF Energy, the two firms now produce around a quarter of the UK’s electricity, employing nearly 20,000 people across the country and supplying gas and electricity to 5.5 million businesses and homes.

Gilles Chauveau was chief operating officer of EDF Energy at the time. When he looked at the IT organisation of the combined company, he saw the need for a drastic overhaul.

“There was a heterogeneous sourcing landscape of internal and external suppliers, with no consistency between the two companies,” Chauveau said at Gartner’s recent Outsourcing and Strategic Partnership conference. “Some of the contracts were five to seven years old and had been through several extensions without competition.”

Meanwhile, the relationship between IT and the business was poor. “We had an ‘IT kingdom’ type of governance system,” Chauveau, who is now EDF Energy’s CIO, says. “We had only IT people around the table making major decisions around IT sourcing, and the rest of the business was kept out.”

Renewable generation in the UK grew by 56% to 12.8TWh in the second quarter of 2013 with its share of electricity generation up 5% from the same period in 2012 to a record 15%.

Figures from DECC’s Energy Trends report reveal biomass saw a 58% hike to 5.2TWh on the back of Tilbury’s return to operations and the conversion of Ironbridge and one unit of Drax coal stations to dedicated biomass.

Wind generation increased by 62% – with onshore up 70% to 3.8TWh – due to increased capacity and high wind speeds. Solar and wave & tidal saw a 22% increase while hydro was up 29%.

Renewable electricity capacity was 19.5GW at the end of the second quarter, a 38% or 5.3GW rise on the year-ago period.

The average annual dual-fuel bill – covering gas and electricity – is £1,315 per household. This figure, published by regulator Ofgem in mid-September, is based on the latest assumption of the amount of energy a typical household uses.

Bear in mind, this is an average. The amount you pay depends on your energy consumption and the method of payment.

It is one of the largest regular bills that a household has to pay, behind mortgage or rent, and council tax. Prices have risen in recent years, and analysts predict another increase in the coming weeks.

ICHRON, a Cheshire firm that provides analytical services to the oil and gas sector, has been bought for £12.5m.The firm, based on the Gadbrook Business Centre in Northwich, has been sold by four shareholders to Oxfordshire-based environmental consultancy RPS Group in a cash deal.Established in 1995

He pledged to freeze gas and electricity bills for every home and business in the UK for 20 months if his party wins the 2015 election.

The chairman of British Gas owner Centrica told the BBC that Labour’s plan could potentially cause “economic ruin” for energy firms.

Sir Roger Carr said the plan would leave firms in a precarious position.

“When costs are outside your control, but someone is fixing your price and putting a ceiling on it, the risk of course is that it is potentially a recipe for economic ruin for a company.” Sir Roger said.

Wednesday, 25 September 2013

Earlier this week figures from a new study revealed that it is now less costly to get electricity from solar panels and wind turbines that from traditional coal-powered power plants for the first time in the US.Thanks to tax-breaks for ‘green’ power and taxes to help offset climate change the Journal of Environmental Studies and Sciences’ latest study into the commercial energy market has seen the two most widely-used forms of eco-friendly energy dip under coal for the first time in the North American market.

Tuesday, 24 September 2013

In May this year, academics from Washington State University published research confirming a long-held suspicion: being loud and confident is a more effective way to win an argument than being right. The researchers assiduously mined their data from more than a billion Tweets, but a quick look at the increasingly polarised debate about shale gas in the UK might have saved them some time.

For a significant number of climate-sceptic Tories and rightwing commentators, shale is a silver bullet. The hapless energy secretary Ed Davey has been sidelined by George Osborne, who appears to be setting energy policy on the advice of his father-in-law, Lord Howell.

The intervention of Boris Johnson last week has, I suspect, more to with his desire to be on side with discontented Tory MPs than any real appreciation of energy policy. His description of gas as “clean” and “green” was both crowd-pleasing and simply wrong.

But taken together with George Osborne’s statements about “cheap” gas, the chancellor’s conference speech trumpeting tax breaks for the industry and the energy minister’s pledge to make it “easier” for fracking to happen, Boris’ comments form part of a Tory campaign to present shale gas as an abundant, immediately available, cheap source of energy that solves all of our problems. By simplistically extrapolating from the experience of the USA, they have created a false prospectus about a controversial technology instead of providing the rational, evidence-led debate that is required.

Against that backdrop, it is not altogether surprising that the legitimate environmental concerns of those living in the vicinity of potential exploration and extraction sites have been seized upon by some of those who have a fundamental objection to the use of any fossil fuels in our energy mix. Anti-gas campaigners make claims about earthquakes and water contamination, drawing on early experiences in the USA to suggest that a wrecked landscape is the inevitable consequence of fracking.

In reality, many of these concerns are a reflection of the dangers of under-regulation. This is why in March 2012, as Labour energy spokesman, I set out six clear regulatory conditions that should be met prior to any extraction taking place. Robust regulation and comprehensive monitoring are the pre-requisites in addressing those legitimate and deeply-held concerns while also, as former UK scientific adviser Sir David King put it, laying to rest the “big scares” of earthquakes and water contamination.

Japan took the last of its 50 once-vital nuclear power stations offline last Monday. But despite having one of the hottest summers on record, Japan has had no power rationing or blackouts this year. How did they do it? Put simply, the country cut back.

“Japan’s nuclear reactors have mostly been replaced by post-catastrophe efficiency gains which reduced [energy] consumption by around 15-20%,” says Kevin Meyerson, a retired American businessman and now an energy conservationist living in Japan. “For example, offices throughout Japan have replaced high-consumption lighting with newly developed-in-Japan low-power LED lights, cutting office electricity consumption up to 40%.”

Such conservation has made Japan’s vulnerable nuclear power plants redundant for the time being. Cutting energy demand by 10% across the board in Japan has eliminated the need for about 14 nuclear reactors, according to government figures.

Leading the charge to unplug are major corporations like Komatsu, the world’s second-largest construction equipment manufacturer, which has pledged to cut its energy consumption by at least 50% by 2015. They are not alone. In the wake of the Fukushima disaster, public and private conservation efforts have helped keep power demand comfortably in check.

Britain will have to build the equivalent of one new power station every eight weeks until 2020 at a cost of £48billion if the Government is to meet its green energy commitments, power bosses have warned.

A recent study by the National Grid shows that by 2020 the country will need more than 30 gigawatts of new power provision as it moves away from coal-fired power stations, which are being closed on environmental grounds.

This means there will be a greater reliance on green energy, predominantly wind and solar, though the calculations still include the assumption that a substantial amount of energy will be provided by gas-fired power stations.

Energy giants are lining up to land millions of customers with inflation-busting price rises before winter.

Suppliers are understood to be preparing to unleash hefty bill increases within weeks, adding to a “cost of living crisis” for many households.

British Gas, the UK’s biggest provider, is thought to be considering putting up gas and electricity prices by 8% – three times the rate of inflation – adding more than £100 to a typical dual-fuel annual bill.

The company may wait until early October, after the political conference season is over, to lessen the backlash.

It is desperate not to be the first to announce its increase and it may be one of its rivals – npower, E.ON, EDF Energy, Scottish Power or SSE – which breaks ranks first. When one company does move, it is likely others will follow suit.

British Gas said that it “never comments on future pricing movements”.

The threat of an increase will strike fear into millions of households who have suffered above-inflation rises in recent years.

Many now have to choose between heating or eating. British Gas could make an announcement before mid-November when its owner, Centrica, is due to give a trading update.

The company unveiled a 6% increase last November, taking its average dual-fuel bill to £1,232. In 2004, it stood at £543.

Suppliers are expected to blame the latest increases on a 10% jump in the wholesale cost of winter energy, green levies and distribution costs.

However, British Gas has seen profits rise by 3% in the first half of this year to make £356million.

The energy minister Greg Barker has spoken out in favour of energy company profits, insisting they are necessary in order to fund crucial investment in new power plants and that Britain enjoys some of the lowest electricity and gas prices in Europe.

Ministers want Britain’s energy suppliers to help fund £110bn of investment in new power plants to keep the lights on this decade.

“Unless companies are making profits they cannot reinvest those profits back into new projects,” Mr Barker said. “So if the companies aren’t making profits, we are not going to get the investment.”

Saturday, 21 September 2013

Consumer group Which? has made several damning criticisms of the energy market in a new statement, going as far as to call the sector ‘broken’.Towards the end of 2012, the government aimed to simplify the energy market for consumers with the introduction of the The Energy Bill. The long-discussed legislature aimed to simplify the available tariff and make it easier for private and commercial energy consumers to choose the most cost-effective plan for their property.

However, new figures from Which?, laid out the ‘bewildering mess’ of options available to consumers and highlighted the prevalence of standing charges – fixed, daily charges commonly used to sober the cost of equipment.

Friday, 20 September 2013

RenewableUK released an updated study into employment in wind and marine energy in the United Kingdom. Working for a Green Britain and Northern Ireland reveals that together these important growth industries – wind, wave, and tidal energy – now directly employ 18,465 people full time, a 74% increase in jobs since 2010.

The report shows that the offshore wind sector saw the biggest growth between 2010 and 2013, with the number of direct jobs doubling from 3,151 to 6,830. When including indirect jobs (companies that supply goods and services to the sector, such as gearbox component manufacturers) the wind, wave and tidal energy industries support the employment of over 34,000 people.

The research also highlights the fact that women make up 20% of the sector’s workforce – this is lower than the proportion of women in technical and professional occupations in the UK, but proportionally higher than in the power sector overall, thereby demonstrating the sector’s success in attracting women into the energy industry.

Looking to the future the report predicts that more than 70,000 jobs could be created over the next decade, nearly half of which would be in offshore wind. RenewableUK’s Chief Executive, Maria McCaffery said: “The offshore wind sector alone could be employing nearly 45,000 workers in the 2020s. As an industry we are truly creating jobs out of fresh air.”

She concluded saying, “The scale of the opportunity is massive, but success is not guaranteed. To really harness the economic benefits of our technologies we must ensure that there is certainty for industry. Certainty on future levels of deployment of wind, wave and tidal energy over the next decade will enable firms to invest in the right people and the right skills, and ensure we maximize the number of green collar jobs we create as we transform our electricity system. We want to ensure offshore wind is given the same opportunity to prosper as the North Sea oil and gas industries had in their heyday”.

Thursday, 19 September 2013

A UK trade association has suggested that the power rental sector in the UK has an important role in providing essential back-up power in the event of major power blackouts.

Robert Beebee, chairman of The Association of Manufacturers and suppliers of Power Systems (AMPS), which represents suppliers of diesel generators, said the UK’s power infrastructure was becoming less secure, with a likely ‘energy margin’ of just 2% by 2015/16 because of the planned closures of large coal, oil and nuclear power stations.

Mr Beebee was responding to a documentary drama, Blackout, broadcast last week on the UK’s Channel 4 network, which was an account of the consequences of a cyber attack on the UK’s vulnerable power infrastructure.

“People don’t consider where their power comes from, and consider even less that they could mitigate the threat of a blackout with a relatively small generator,” he said, “The potentially lifesaving and business-saving role of a generator is something the public are largely unaware of. I think the number of diesel generating sets would explode if people understood the potential threat of blackouts due from 2015 onwards. “

Mr Beebee said contingency planning was needed; “Short-term, I think we need a strategy for allocating the available hire fleet to strategic locations in the event of an emergency: if suitable generators were identified now it would make the processes far smoother in the event.

A multi-axis wave energy converter that can harvest energy no matter which way the sea is running has won the UK leg of the James Dyson Award.The Renewable Wave Power RWP generator relies on loosely coupled pistons to absorb forces from the peaks and troughs of waves in any given direction.Inventor Sam Etherington, a mechanical engineering graduate from Brunel University, says it can convert external movements into hydraulic pressure much more efficiently than conventional linear devices.He will now receive £2,000 from the James Dyson Foundation to conduct more tests and enrol his device in European trials for fledgling tidal power systems.

Wednesday, 18 September 2013

Kansai Electric Power Co’s 1,180 MW Ohi No.4 reactor is scheduled to be disconnected from the power grid late on Sunday and then shut for planned maintenance. It is the only one of Japan’s 50 reactors in operation after the nuclear industry came to a virtual halt following the March 2011 Fukushima disaster.

Japan last went without nuclear power in May-June 2012 – the first shutdown since 1970 – a year after a massive earthquake and tsunami triggered reactor meltdowns and radiation leaks at the Fukushima facility. The country’s nuclear reactors provided close to a third of the electricity to keep the $5 trillion economy going before the Fukushima disaster, and utilities have had to spend billions of dollars importing oil, gas and coal to make up for the shortfall.

In 2011, Japan suffered its first trade deficit in more than three decades, and in July of this year it logged its third-biggest trade deficit on record, at 1.02 trillion yen ($10.5 billion), as a weak yen and rising oil prices made energy imports more expensive.

A row has broken out over the selection of Scottish Power, one of the big six energy companies, as a sponsor of a national fuel poverty conference opening on Monday in Yorkshire.

The campaign group Fuel Poverty Action said a business that made over £700 million in profit last year “whilst people froze in their homes” should not be sponsoring this kind of event.

Speaking for the group, Clare Welton said: “In order to really tackle fuel poverty, we need to see investment in renewables and have the control of energy in the hands of communities, not money-grabbing energy companies who continue to hike their prices year on year.”

But National Energy Action, organiser of the Harrogate conference, defended its choice of sponsor, saying it was happy to work with any firm which supported its efforts to raise the profile of a serious problem.

“Really, we are critical of the government for not providing the funds from direct taxation rather than relying on energy companies,” said a spokesman for the NEA, which describes itself as the UK’s leading fuel poverty charity.

Scottish Power came under particular fire this summer when its annual report revealed a doubling of annual pre-tax profits to £712m barely months after it had hiked its gas and electricity prices by 7%. The same report also showed that Scottish Power had paid a dividend of £890m to its parent company, Iberdrola, and given a £129,000 bonus to chief corporate officer Keith Anderson, taking his total pay for 2012 to over half a million pounds.

Fuel Poverty Action accused Scottish Power at the time of “making a killing” while Citizens Advice also expressed concern that there were “too many families forced to choose between heating or eating” and urged companies to put customers before shareholders.

Tuesday, 17 September 2013

Community-owned windfarms on some of Scotland’s remotest islands are likely to gain from a new deal to buy their electricity at a higher price, Ed Davey, the energy and climate secretary, has said.

Davey is to introduce a guaranteed price for electricity generated by onshore windfarms in Shetland, Orkney and the Western Isles after hearing pleas from developers and islanders for help with the higher costs of building windfarms and selling power from outlying areas.

The energy secretary, announcing the measure at the Liberal Democrat party’s annual conference in Glasgow on Sunday, believes the higher price will be a significant incentive to wind power developers and will particularly help island communities build their own small-scale windfarms.

Before this, the Scottish government’s energy minister, Fergus Ewing, had made a competing announcement that he had given consent to the first phase of what could be Europe’s largest tidal project.

Ewing said the developers MayGen had permission to build a nine-megawatt demonstration project of up to six tidal turbines in the Pentland Firth off Orkney. Eventually MayGen could install an 86mw array of tidal machines.

Davey said: “It’s possible that we might see a big increase in community windfarms because of the way that the Scottish islands develop their energy resources.”